Vendor Management: A Long Term Relationship?
What do a botched, contractor-led home remodeling project, a wedding catering scheduling disaster and the failed roll-out of the Healthcare.gov web site have in common? A huge headache, for sure. But they also represent poor vendor management at some level. Effective vendor management can avoid or significantly minimize the likelihood of experiencing problems like the ones described above. Good vendor management can also increase your company’s profitability and create a strategic advantage because you will save time, money and increase efficiency. To get these situations on track whether you’re replacing the vendor or staying with the existing one, you soon realize that the vendor and the vendor relationship must be better managed. After all, if a good vendor is hard to find you want to keep the relationship healthy on all fronts. Regardless of whether you have a great or challenging vendor, Vendor Management is a practice that brings value and accountability to any project. It does not mean that you have an incompetent vendor or an untrustworthy relationship. It means that you take a smart, strategic, proactive approach to making sure all project team members (which includes your vendors) are marching in the same direction, at the right speed, and talking the same language. It means the difference between the life and death of your project being delivered on time, within budget, and within scope with high quality. It does not have to mean taking a “watch dog” approach where your vendor is being hounded at all times and the project manager is waiting for the first opportunity to point out a mistake. I am talking about a more effective and collaborative approach to vendor management that ensures the vendor is integrated into the project team, informed, and communicates on all deliverables, issues, and status they are engaged in. The skills and competencies required to successfully manage vendors are extensive and often overlooked. This may be due to an over reliance on decision-making based on gut feelings, a casual referral or seat-of-the-pants thinking. Whatever the reason, leaving vendor management to novices or busy managers is a risky proposition and ill advised.
Vendor Management primarily involves the following:
- Defining project requirements
- Vendor Selection and Evaluation (makes sure there’s a process and follow it)
- Managing Diverse Teams
- Engaging in Procurement Processes, Contract Administration, Enforcement and the Legal Process
- Utilizing Project Management Skills and Change Management Skills
- Constant and Efficient Use of Interpersonal Skills and Business Communication Skills
- Strong Emotional Intelligence
- Proposal Writing
- Use of Technology Such as Vendor Management and Deliverable Tracking Software
- Vendor Performance Assessment
- Risk Management
- Cost Control and Monitoring
It’s important to note that vendor management is a part of project management. Great project managers bring a high level of expertise and experience to the vendor management process. Other benefits of using a project manager include ensuring the right fit during vendor selection, providing vendor oversight throughout the project, ensuring accountability, and helping your team avoid common pitfalls that rear their head during projects where external vendors are involved.
Vendor Management Strategy
A project manager will help you develop, assess and implement an appropriate vendor management strategy. Some key elements of a vendor management strategy are:
- The development of a standard process for qualifying new vendors
- Establishing quality criteria and agreements
- Regular auditing to ensure that you and the vendor are clear on expectations and deliverables.
Vendor Management Tools
A few tools to help mitigate vendor management risk may include a performance assessment protocol, risk identification alerts and risk mitigation action plans (especially for corrective action). What do you think is the most challenging part of vendor management? Do you maintain good relationships with your vendors? Chrystal Richardson is Managing Partner of CE Wilson Consulting, a project management and business efficiency consulting firm that has managed projects for technology, mining, medical and manufacturing clients since 2001.